The tax saving that results from the depreciation deduction is called the __________.

The tax saving that results from the depreciation deduction is called the depreciation tax shield.

A depreciation tax shield is the reduction in taxable income that a business experiences due to its depreciation deductions. These deductions are allowed by tax authorities as a way to recognize the wear and tear of tangible assets over time, thereby providing a non-cash deduction that can lead to a lower tax liability. For instance, when a company depreciates an asset, it spreads the cost of that asset over its useful life, and each year, it can deduct a portion of that cost from its taxable income. This ultimately lowers the overall tax burden, allowing the company to retain more of its earnings. Understanding the depreciation tax shield is critical for businesses when making investment decisions and planning their tax strategies.